(AP) - Federal regulators pledged Monday to do allthey can to shore up the struggling U.S. banking system and saidthey will launch a revamped program to inject fresh capital intofinancial institutions this week.
The Treasury Department, Federal Deposit Insurance Corp., Officeof the Comptroller of the Currency, Office of Thrift Supervisionand the Federal Reserve jointly issued the statement amid growingconcern that some of America's biggest banks may need additionalassistance to survive the fallout from the worst financial crisissince the 1930s.
The statement did not name any specific banks or respond toreports that the government was considering increasing itsownership of Citigroup Inc.
The White House just last week downplayed persistent speculationthat some banks could be effectively nationalized by the federalgovernment.
"A strong, resilient financial system is necessary tofacilitate a broad and sustainable economic recovery," theregulators said. "The U.S. government stands firmly behind thebanking system during this period of financial strain to ensure itwill be able to perform its key function of providing credit tohouseholds and businesses."
A revamped program, announced by Treasury Secretary TimothyGeithner earlier this month, to plow federal money into banks inreturn for giving the government ownership stakes will startWednesday.
Regulators provided some details on that program Monday.
"Any government capital will be in the form of mandatoryconvertible preferred shares, which would be converted into commonequity shares only as needed over time to keep banks in awell-capitalized position and can be retired under improvedfinancial conditions before the conversion becomes mandatory," theregulators said.
But when asked about reports that the government was consideringincreasing its ownership of Citigroup, Treasury spokesman IsaacBaker said the department did not comment on conversations withspecific banks.
"We've made clear that we will do what is necessary tostrengthen and stabilize the financial system so that it canprovide the credit necessary to support economic recovery," Bakersaid in a statement.
The government is open to considering a request to convertpreferred shares purchased as part of its $700 billion rescueprogram into common stock "if the institution and its regulatorbelieve it would promote the long term stability of thatinstitution and we believe it's in the best interest of long termstability of our economy and financial system," Baker said.
The Wall Street Journal reported late Sunday that Citigroup wasin talks with federal officials over the possibility of thegovernment expanding its ownership of the struggling bank to asmuch as 40 percent of its common stock. The newspaper said bankexecutives hope the stake will be closer to 25 percent.
Later Monday, Geithner will join President Barack Obama andother guests at a fiscal responsibility summit at the White Houseto discuss how to curb a burgeoning federal deficit laden withSocial Security, Medicare and Medicaid obligations.
